1987 (6) TMI 25 - HC - Income Tax

Banking income qualifies for tax exemption under section 80P(2)(a)(i) - High Court ruling.

The High Court held that income from commission and subsidies received by the assessee, except income from locker rent, qualifies for exemption under ... Co-operative Society, Exemptions Issues Involved: The judgment addresses the following issues: 1. Whether income from commission and locker rent earned by the assessee are entitled to exemption u/s 80P(2)(a)(i) of the Income-tax Act, 1961Rs. 2. Whether the subsidy received by the assessee for meeting part of the expenditure of a new branch is liable to be taxed as income and not entitled for exemption u/s 80P(2)(a)(i)Rs.Issue 1 - Income from Commission and Locker Rent: The High Court considered whether the income from commission and locker rent earned by the assessee, a co-operative society engaged in banking activities, is eligible for exemption u/s 80P(2)(a)(i) of the Income-tax Act, 1961. The Tribunal pointed out that the commission income was from collections and dealings in various instruments, while subsidies were received for new branch expenditures. The Court referred to precedents emphasizing that income from commission, subsidy, and other sources is attributable to the business of banking and thus deductible u/s 80P(2)(a)(i). However, the Court found that income from locker rent did not correlate with banking activities and thus did not qualify for the exemption under section 80P(2)(a)(i).Issue 2 - Subsidy Received by the Assessee: Regarding the subsidy received by the assessee for a new branch's expenses, the Court analyzed whether it should be taxed as income and not entitled to exemption u/s 80P(2)(a)(i). The Tribunal explained that the State Government subsidized part of the business expenditure for new branches. The Court referred to relevant legal provisions and previous judgments to determine that such subsidies, being related to banking activities, are attributable to the business of banking and therefore qualify for exemption u/s 80P(2)(a)(i).The High Court concluded that the income from commission and subsidies received by the assessee, except income from locker rent, is attributable to the business of banking and eligible for exemption u/s 80P(2)(a)(i) of the Income-tax Act, 1961. However, income from locker rent does not fall under the banking activities and is subject to different provisions of the Act. The parties were directed to bear their own costs in each case.